Perhaps you wonder how equity sharing can help a homeowner sell his property quickly or avoid foreclosure, given that this approach has mostly been described as a relationship between ‘investor-buyer.’ Is Real Estate Equity Sharing an advanced strategy for saving or selling a home owner’s home?
Well, “investors” can literally be real estate investors, relatives, friends, family, and, most significantly, property owners in an equity sharing agreement. There are three common ways in which homeowners/sellers can either sell, save, or even avoid selling their homes at very low prices using the equity sharing arrangement. These comprise of;
In a slow-moving market, a property owner putting his home up for sale may face a very tough obstacle. Without getting an offer, the home is likely to remain on the market for weeks and months. However, if, for one reason or the other, the homeowner wants his home to sell quickly, they can opt for an equity sharing strategy with a potential buyer. For the sole purpose of saving his or her home, a homeowner can also opt to get into an equity sharing strategy. They could face foreclosure in due time if a homeowner is struggling to make ends meet and they are not in a position to bring their home payments current. However, if they have positive equity in the house, they can avoid foreclosure. They can have an investor partner with them using an equity sharing strategy and help to bring their property current. In exchange, the investor shares the house’s equity as well as any potential future returns on the investment.
Another way a homeowner can opt for equity sharing arrangement is If they are planning to move but do not really want to drop their home price for a quick purchase. A financially secure homeowner can choose to get an investor with whom he will share part of the equity of his home rather than sell it at a low price because they are moving out in haste. The seller could retain 20% ownership and buy another home in his new location when an investor buys an 80 percent stake in the home. Then, say, 7 years down the line, according to their equity shares, the seller and investor could sell the home and participate in the profits of the sale.
Selling a house using the strategy of “Equity Sharing”
A seller can prevent the frustration of waiting for his home to sell day after day in a slow-moving market. A seller can help create a buyer with equity sharing. And the home sells when there’s a buyer! What do we mean by the fact that it can help a home seller create a buyer?
To make the required down payment, many home buyers lack enough cash or credit. This hinders their dream of home ownership. In addition, for the sake of obtaining credit, most of these buyers are scared of dealing with banks. By offering them an opportunity to be homeowners in the equity sharing arrangement as the “occupier,” many of them get attracted by the idea and eventually turn into home buyers.
You will become the investor in the equity sharing agreement while your potential home buyer becomes the home occupier. You will enjoy getting tax deductions on your share of equity as an investor. And with time, you will enjoy a joint venture-like return on the investment, provided the equity on the house increases. Then they may eventually cash in and buy you out to keep the home when the occupant finally gets enough equity.
Use the “Equity sharing” strategy to save your home from foreclosure
If you struggle to make ends meet and maybe face foreclosure, you can save your home by opting for an equity sharing arrangement with a willing investor. In the agreement, while putting the house up for sale, the investor brings your mortgage current and continues to make monthly payments. This way, you will not lose your home and you may be able to share in the future profits that may arise from the sale of your house at the same time. You may even be lucky to find an investor that allows you until it sells to continue living in the house.
You can also be prompted to vacate the house by the arrangement so the investor can rent it out. The investor must agree to share part of the rental income and future profits resulting from the house sale as per the equity shares in such arrangement. He must also share any appreciation that by that time the house might have gained. A certain percentage is normally set and the investor will reduce the costs he incurred, such as the cost of bringing current property, property taxes, repair costs, mortgage payments, management costs if any.
The arrangement plan for equity sharing allows you time to put your finances back in order. You may be able to accumulate enough equity to buy the investor out at a set price some time in the future. At the end of it all, this will allow you to maintain your home.
As one of the best ways for home buyers to become homeowners without having to make the hefty down payments required by sellers, equity sharing is fast gaining track in the real estate world. “Two or more parties come together in equity sharing and agree to have an interest in ownership of the home on sale, hence the term “equity sharing. Typically, some or all of the home’s down payment is made by one or more of the parties, referred to as the ‘investor’. The other party often referred to as the “occupier,” lives in the home and pays all the monthly expenses associated with the home, such as property taxes and mortgage payments.
An equity sharing home arrangement benefits both parties with house equity because the investor receives an investment with significant growth potential for one, and this is secured by real estate. On the other hand, since they lacked the necessary down payment, the occupant can now buy a home that they would otherwise not have been able to afford. Because honestly, even if a buyer has a good income and can make heavy mortgage payments, when starter houses are now going for $400,000 or more, it is difficult to save up for a whopping 10 to 20 percent down payment.
In addition, both parties share in the appreciation of the property, and if the equity sharing agreement is actually done properly, it can provide both parties with significant tax benefits.
When you’re ready to move forward with selling your house, we’re here to help. Contact us any time at (772) 732-2797